It's a Maxwellian tangle

The collapse of Independent Insurance was described as "Maxwellian" in its complexity yesterday by the insolvency expert dismantling the commercial insurance group.

Explaining that it would be months before a clear picture emerged of Independent's liabilities and the events which triggered its demise, Mark Batten - the joint provisional liquidator from PricewaterhouseCoopers - said the company would have run out of money in the immediate future.

"It is clear that this company is insolvent," he said.

Asked if he had seen anything as complicated before, Mr Batten replied "Maxwell", referring to the collapse of the Mirror group publishing empire controlled by the late Robert Maxwell.

Underlining the severity of the matter, the serious fraud office confirmed that it had launched an inquiry into Independent Insurance's affairs following a referral by the Financial Services Authority on Monday.

PwC was last night pressing ahead with the sale of the collapsed company's assets. Mr Batten said tens of millions of pounds of assets had already been sold, but refused to give more details.

Next to go are likely to be 450,000 policies taken out by council estate tenants' associations. Mr Batten said negotiations were taking place with general insurance company Royal & Sun Alliance on a deal to acquire the policies. An announcement is expected today.

PwC also made it clear that there would be job losses among Independent's 2,000 workforce. "All new business staff are likely to be made redundant," Mr Batten said.

There are now three investigations into Independent Insurance: the criminal investi gation by the SFO, which could take three years; an inquiry by the FSA; and the examination of its books by the liquidators.

The SFO will try to establish whether there is a case against any of the company directors, including former chief executive Michael Bright. The last two are looking into allegations that some insurance claims were not entered into Independent's accounts.

"It would be wrong to start pointing the finger now," Mr Batten said, adding that PwC has only been working on the case for three days.

Independent shares were suspended last week at 81.5p as the firm attempted to raise £200m from shareholders to plug a financial black hole.

The fundraising failed after Independent admitted it was unable to quantify the amount of cash it needed to support future claims. This followed the emergence of a letter from Watson Wyatt, the company's external actuaries, which said it could no longer be sure of the scale of Independent's capital requirements.

The scale of the liabilities remains unknown. According to Independent Insurance's annual report for 2000, the group had gross assets of £1.7bn and gross liabilities of £1.40bn on December 31, 2000.

PwC will today post a letter advising all policyholders - including PizzaExpress, the McLaren Formula One racing team and the London fire brigade - to consider seeking alternative insurance cover immediately.

In the letter the liquidators tell policyholders that they may not receive full payment in respect of any claim against Independent.

Separately, some brokers who dealt with Independent Insurance are believed to be considering legal action over the company's demise.